Dubai: Rents in most residential communities in Dubai will continue to soften this year and in 2017, as more flats and villas are expected to be delivered, analysts told Gulf News.

In 2016 alone, overall rents are forecast to drop around 2 per cent to 3 per cent. However, Dubai’s property market remains attractive to investors, with industry data indicating an increase in transaction and investment values in 2015 compared to a year earlier.

“Residential rents are expected to soften further next year as more supply comes through,” Haider Tuaima, head of research at ValuStrat, told Gulf News.

Overall, Tuaima expects the property market to stabilise, with “slight residential price recoveries” in some areas in the near term, followed by “soft upturns” during the second half of 2016 continuing into 2017.

Tuaima brushed aside speculations that the real estate market in Dubai has been negatively affected by the decline in global oil prices, or that investors are starting to lose interest. He pointed out that rents have slowed down mainly because of “supply and demand factors.”

“We don’t agree that global oil prices have a strong correlation with Dubai’s property prices and rents. Dubai’s real estate market is relatively young and has yet to go through mature real estate cycles to allow us to analyse historic trends.”

“Interestingly, as oil prices rose between 2009 and 2011, the Dubai property cycle was moving towards a trough. We believe that global oil prices and other macro-economic factors could affect the general sentiment of some non-resident investors, but not all.”

Quoting figures from the Dubai Land Department, Tuaima said that some Dh267 billion was poured into the real estate market in 2015, a 22 per cent increase over 2014. “Our own data analysis, by our proprietary ValuStrat Price Index, reveals that no effective change in values was seen in the second half of 2015.”

The latest research from Core, UAE associate of Savills, echoed Tuaima’s forecast, citing that both prices and rentals in Dubai’s residential market are expected to soften further over the next 12 months.

Rental rates for prime apartments, such as those in the Dubai International Financial Centre and Jumeirah Beach Residence (JBR), experienced the highest decline of about 4 per cent in 2015, while villa rents fell by between two per cent and eight per cent.

Alp Eke, senior economist at the National Bank of Abu Dhabi (NBAD), said he expects rents to “most probably drop” further this year.

“In 2015, rental annual average declined at around 2.5 per cent, in comparison to 2014 annual average. In 2016, in my opinion, a further 2-3 per cent reduction in rents is also expected,” Eke told Gulf News.

Some sections in Dubai’s tenant community, however, would disagree that the cost of renting flats and villas in Dubai is declining.

Nelson Abraham, an HR professional working in Dubai, said that accommodation costs in the emirate are still quite expensive.

Abraham is renting a one-bedroom apartment in Al Barsha. He spends 30 per cent to 33 per cent of his monthly income on rent. “It is much more expensive [to rent] in Dubai. I think the rent here can be very excessive as a proportion of salary,” Abraham said.